Renewable energy, net metering and net billing

Driven by social, economic and environmental concerns, the Government of Jamaica has expressed increasing interest in the development of renewable energy. Facilitating net metering is one strategy identified in the Ministry of Mining and Energy’s (the “Ministry’s”) draft National Renewable Energy Policy. Net metering is a system which would permit a customer with a renewable source, such as a solar panel to connect its supply to the Jamaica Public Service Company’s (“JPS’s”) grid. The customer-generated energy may then be used to offset energy provided by JPS to the customer. Pursuant to the draft policy, customers would be credited at retail prices for any energy produced and supplied to the grid. Under a net metering policy, the customer would enjoy one-to-one savings for each unit of energy produced.

Consistent with its over-arching policy to encourage renewable energy, the ministry is considering measures to ensure the legal and financial feasibility of net metering. The Office of Utilities Regulation (OUR) has released a draft Standard Offer Contract with terms and conditions on which customers may connect to the JPS grid. One very important feature of this contract is that it employs a net billing system rather than the net metering system described above. Under the net billing system, the energy generated by the customer is measured (using an additional meter) and fed into the grid.

The customer is charged for its consumption at prevailing retail rates (approximately 35 US cents per kilowatt hour (kWh)) and is credited for the amount that it has supplied to the grid at the “long run avoided cost of generation to the JPS Grid”. The avoided cost is published by the OUR and is approximately 10 US cents per kWh. Whereas a customer might anticipate saving 35 cent per kWh generated under net metering, that customer would save 10 cent per kWh generated under net billing. Industry commentators have argued that the choice of the net billing mechanism as well as the calculated avoided cost will diminish the economic feasibility of customer generation of renewable energy.

The Standard Form Contract also requires the customer to obtain licences from the ministry to operate the equipment and to connect to the grid, insurances against any harm it may cause to JPS equipment and certification of inspection by the Government Electrical Inspector. These several administrative hoops and the economic constraints caused by the net billing methodology may make customer investment in renewable energy generation less attractive than it might otherwise be.

The OUR is currently accepting comments from the public on the Standard Draft Contract.